Council uses ‘lease’ financing to pay JFA dissolution settlement

MARTINEZ, Calif. ­­– Following the advice of its bond counsel, the Martinez City Council voted twice Wednesday on a lease agreement that would finance the resulting liability from the dissolution of the Martinez-Pleasant hill Joint Facilities Agency (JFA).

By seeking the five-year loan, the city is in a position to save money as it pays Social Security taxes for up to three years retroactively for Martinez employees who had been classified as working for the JFA. Those employees are being reclassified as city employees, and the city also is picking up their share of retroactive Social Security payments.

The cost isn’t expected to exceed $4 million, the amount being sought by the city. How much the loan will cost the city is still being determined, Finance Director David Glasser said. Interest is expected to be 3.58 percent, but any amount that has not been used can be invested to earn money in the meantime, he said.

Originally, the city sought a loan from US Bank, but its bond counsel, Jones Hall, recommended modifying the loan structure to conform to California’s constitutional debt restrictions for governmental agencies.

“It’s a standard procedure,” said Scott Ferguson, partner in Jones Hall. In fact, earlier Martinez City Councils have used the funding system to underwrite City Hall and water system improvements, the Council learned.

Under this approach approved Wednesday by the Council and again in a vote by the same individuals acting as the board of the Martinez Public Improvement Corporation, Martinez leases City Hall to the nonprofit corporation, which in turn leases it back to the city in return for semi-annual lease payments. The loan will be paid back in five years.

In earlier comments about the JFA, Assistant City Manager Anne Cardwell said the Pleasant Hill/Martinez JFA was founded in 1975 between Martinez and Pleasant Hill to pool resources on common expenses. “From the original agreement, we can see that the purpose was to develop and operate shared facilities and services,” she said.

“Through other records, we found that the agency provided information technology and transportation services. While there is some early record of these mutual services being performed, the agency currently provides services solely to the city of Martinez, and no record could be found to confirm when the city of Pleasant Hill withdrew,” she said.

Cardwell said that with new leadership, Martinez started a “proactive approach” to resolve the situation.

“In late 2017, the city began talks with PERS, Social Security and the IRS to reach a resolution that would lessen the impacts to retirees, employees, and the organization overall,” she said.

“The city began talks with PERS, Social Security and the IRS, and kept active employees notified on the progress,” she said. “We are happy to report that we have had notable success in our attempts to lessen the impacts of the dissolution of JFA on our retirees, active employees, and former employees.”

CalPERS agreed to adjust enrollment and earnings records rather than ask city staff to do the work, and agreed not to retroactively adjust any PERS pensions, she said. All JFA employees were officially under the City plan with PERS by Wednesday, she said.

“Social Security has indicated they will accept corrected earnings records that will provide the reporting of Social Security earnings back to the dates of hire in the JFA,” she said. “This should allow for some retirees to gain new eligibility for a benefit and may increase a benefit for others.”

In addition, the IRS has said it wanted only the retroactive contributions from the city for the “open years,” currently 2015 through July 31, she said.

Also at Wednesday’s meeting, the Council approved a schematic design for renovations to Golden Hills Park, moving a picnic area that had become a policing problem, replacing an odd-shaped community center with a rectangular one that is expected to serve the park better, paved pathways, additional lights and light-emitting diode illumination.

The schematic reflects suggestions made by the public at a community workshop at the park earlier this year, City Engineer Tucker said.

During construction next year, when the park will be closed to the public, the city will try several gopher irradiation methods to make the park’s open field safer. The basketball court will be moved, and Tucker and his staff are attempting to speak with a contractor about the park’s tennis court, which developed problems soon after the most recent repairs.

Vice Mayor Lara DeLaney was concerned that the plans call for removing 15 pines, although Tucker said they had reached the end of their life span and were shedding needles and branches on neighbors’ homes. Other trees would be planted, he said. DeLaney said she hoped if 15 trees are removed, 15 more would be planted.

Most of the funding for the improvements will come from the last part of the city’s Measure H bonds, a $30 million issue that has been used for park improvements. But Tucker said the city is finding several other ways to pay for the project, which is expected to cost nearly $2 million.

However, acting on bids for street sealing will have to wait, because city employees failed to place newspaper advertisements announcing the request for bids as required by California law. The Council was advised to reject the bids and seek new ones so mandated procedures could be followed.

DeLaney said she found it disconcerting, since the bids had been opened and potential contractors had seen each other’s amounts. With increasing prices and possible impacts from tariff changes, she worried the next round of bids could be higher.

She said the state’s requirement for two newspaper advertisements to be placed at specific times is “outdated and outmoded,” adding, “nobody reads those.” Instead, she said, companies can use websites to find projects on which they want to submit bids.

Calling the state’s requirement an “outdated and antiquated method,” she urged the Council to contact the League of California Cities about seeking an amendment to a contract code that is decades old. She also asked if the Council could proceed, given other ways it reached out for bids.

“I think the state law is there for a reason,” Councilmember Mark Ross countered. Advertising in a local paper puts the notice where the job is taking place, he said. And he wasn’t convinced that the next round of bids would be higher.

Bidders “probably will sharpen their pencils,” and put the city in a better position when the second round of bids arrive, Tucker said.

California law governing the procedures “is very strict,” City Manager Brad Kilger advised, saying a city shouldn’t place itself into a position in which there are any questions about its construction bidding processes.

“My understanding is there is no discretion,” he said, and recommended the topic of changing state law be placed on a future meeting agenda.

Bids for the project ranged from $2,466,233.47 to nearly $2.7 million for cape seal work on residential streets throughout Martinez. The work will be paid through Measure D revenues generated from a half-cent sales tax approved by voters Nov. 8, 2016.

Also being advertised are bids for the 2018-19 paving work that will finish base failure repairs that must be done before the cap seal can be started. That will be underwritten by gas tax, including the money from the gas tax increase approved as Senate Bill 1, the Contra Costa County Measure J half-cent transportation and paving sales tax and Measure D money.

Martinez Police Chief Manjit Sappal said his department “is making progress” in filling several vacancies and attracting better-qualified police applicants. In a pool of 13 applicants, five appear to be good candidates, he said. In the past, his department may have continued speaking with only one out of 15 applicants.

He said on the average, of 100 applicants, only one is hired after meeting requirements, clearing background checks and appearing to be a good match for the city and Sappal’s department.

The Council’s recent mid-year raises for police officers has put Martinez in a better recruiting position to fill vacancies that have caused officers who once might have filled school resource officer, homeless outreach and traffic assignments to be put on patrol instead.

“The people spoke. The Council listened. Things are looking good,” Councilmember Noralea Gipner said.

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